Tech boom or bubble? Industry profits rival 2000 Internet boom

Tech boom or bubble? Industry profits rival 2000 Internet boom

Summary: Pent-up demand helped drive record sales of enterprise software and systems in 2010; but something else was afoot.

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TOPICS: Browser, Banking, CXO
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A couple of years ago, it looked like the roof was caving in.

But a funny thing happened on the way to Great Depression 2.0. The tech industry decided not to go along for the downhill ride. As The Mercury News reports, the 150 biggest public companies in Silicon Valley "had their most profitable year in history in 2010," with "combined stock value climbed to the highest level since the Internet boom of 2000."

Apple and Google, two Valley residents, in fact, have been ruling the world in recent times.

But other IT vendors are also in rapid growth mode. And as just reported by ZDNet editor-in-chief Larry Dignan, companies such as IBM, Intel, VMWare, Juniper and Riverbed also had strong results for the first quarter of this year.

Clearly, judging by the rocketing performance of leading IT vendors, enterprise software and systems are hot. There may be pent-up demand on the part of enterprises with legacy or cobbled-together systems finally being unleashed, but something else is afoot as well. IT proved itself during darkest days of the recent recession, providing efficiencies, insights and access to market opportunities on tight budgets and limited staffing resources.

Are we in another tech bubble destined to burst all over the place, as in 2001-2002?  That's also a subject of endless speculation. Boom or no boom, unemployment in Silicon Valley is still at a painful 10.6%, so there is still room for growth.

Some folks at University of Pennsylvania Wharton School seek to calm fears of a potential tech bubble. If anything, valuations for startups or smaller IT ventures are climbing at a modest rate overall, according to experts at the university:

“One angel who works closely with an East Coast technology accelerator says he is seeing companies coming out of the accelerator pull in $3 million to $4 million in funding, compared with $2 million to $3 million for comparable companies a year ago. That is an uptick for sure, but it is small in the context of VC funding.”

In addition, many of the actual values of social network and cloud companies are unknown, since most have not gone public. The report also acknowledges that it's far cheaper to start and fund a business these days, thanks to cloud computing, mobile technologies and social networking.

Topics: Browser, Banking, CXO

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6 comments
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  • RE: Tech boom or bubble? Industry profits rival 2000 Internet boom

    Joe, the only thing I would dispute in your article is the point about asking the "experts". I seem to remember journalist asking the "experts" during the last tech frenzy and the said pretty much the same thing. Look where that got us.
    TraderBEK
    • RE: Tech boom or bubble? Industry profits rival 2000 Internet boom

      @TraderBEK Good point! We often can get better insights by just throwing darts at choices pinned on a wall. I remember in the 1990s, nobody spoke up about the emperor (overvalued dot-coms) having no clothes on. I do sense more caution this time around.
      joemckendrick
    • RE: Tech boom or bubble? Industry profits rival 2000 Internet boom

      @TraderBEK word.
      cameigons
  • The principles aren't the same

    The Dot Com bubble was influenced by ppl who would prop up companies that had no business model at all...but hope to make one up after they get funding. The chain reaction made everyone expect the whole world will be wired by next year or something.<br><br>Today, Intel posts "enthusiasm" yeah...but we still aren't at our state pre Great Depression 2.0. We are just bouncing back and part of the "tech boom 2.0" is really just ppl who have built up the need but didn't want to or couldn't spend money during GD 2.0. I think also during that time, there were some new developments in tech that had a slow start and after a couple of years, some ppl are seeing "irresistable upgrades" with the gap jump. But there is no "omg, the next tech revolution will change the world as we know it" mentality like last decade.<br><br>Ppl are used to computers and know what they can do pretty much. Maybe the next similar bubble will be nano or bio tech. But computers are pretty played out and are becomming more like a commodoty. It will go up prolly as the emerging markets come into play, but I don't think it will skyrocket.
    rasmasyean
    • RE: Tech boom or bubble? Industry profits rival 2000 Internet boom

      @rasmasyean Hopefully, more of a let's-roll-up-our-sleeves-and-make-this-stuff-work attitude can prevail. There is a side of human nature that gets caught up in the hype however.
      joemckendrick
  • profits up, Bush-Clinton-Bush-Obama depression continues

    So, profits are up. The Bush-Clinton-Bush-Obama economic depression among highly-skilled US citizen computer wranglers continues none the less.
    Professor8